CBS Corporation’s second quarter earnings reflect Floyd Mayweather’s impact on its business

Kevin Iole
Boxing Experts Blog

Details of the six-fight, 30-month contract that Floyd Mayweather Jr. signed with Showtime in February still have not been made public, and no specific figure for Mayweather's pay-per-view bout with Robert Guerrero was ever released. Shortly after that May 4 match, Showtime announced it had sold more than 1 million, but did not specify how much more.

But the CBS Corporation's second quarter earnings reports give a vague hint of how "Money May" might have impacted its bottom line.

Only material information which could affect the corporation's stock price is required to be included in the earnings reports.

On Page 2 of the report, released on Wednesday and available in its entirety below, CBS wrote, "Affiliate and subscription fee revenues rose 18%, reflecting the impact of a pay-per-view boxing event, and growth from retransmission revenues and fees from CBS Television Network affiliated television stations."

Mayweather's first fight under the Showtime deal was on May 4, when he defeated Guerrero in Las Vegas. Showtime reported that the bout "would definitely exceed" 1 million pay-per-view units, but did not release an exact number.

Showtime didn't have any pay-per-view events in Q2 2012, so it is unsurprising to see the increased revenue for Q2 2013 reflect an increase.

On Page 5 of the report, CBS breaks down the performance of its cable networks and twice mentions boxing. It noted that cable network revenues increased 16 percent in Q2 2013 as compared to Q2 2012. "The growth was driven by revenues from a pay-per-view boxing event, higher revenues from the licensing of Showtime original series for digital streaming, and higher affiliate revenues."

However, in the next paragraph is language that suggests Showtime could have lost money on the fight. The report notes, "Cable Networks OIBDA for the second quarter of 2013 increased 9% to $207 million from $190 million for the same prior-year period, primarily a result of the revenue growth. The OIBDA increase was partially offset by higher sports programming costs, including the pay-per-view boxing event, as well as higher advertising and marketing costs to promote Showtime series."

OIBDA is an acronym for Operating expenses before depreciation and amortization.

CBS noted that the performance increase in 2013 as compared to 2012 was less than it otherwise would have been except for the boxing match.

This part is open to interpretation, and Stephen Espinoza, Showtime's executive vice president and general manager of sports and event programming, is not authorized to speak on the earnings.

One way it could be interpreted is that CBS has already paid the costs of the event -- The money paid to Mayweather, and the marketing costs to stage the show -- but hasn't fully received all proceeds from pay-per-view sales. It is not uncommon for payments from cable and satellite providers to arrive at a glacial pace, months and, in some cases, years after the bout.

As an example, HBO increased the figure of the record-setting 2007 Mayweather-Oscar De La Hoya pay-per-view from 2.4 million to 2.5 million in 2010. The reason is that payments from cable systems continued to trickle in over those three years.

The other way to interpret it, though, is that the fight didn't perform as well as CBS and Showtime hoped. Thus, the increased revenue shows up still, but the offset is because CBS/Showtime got less than expected revenue from the fight.

There have been reports that the fight did less than 1 million, a claim Yahoo! Sports heard and investigated, but could not substantiate well enough to go on the record. However, Kurt Badenhausen of wrote that the Mayweather-Guerrero fight did 875,000 buys. Espinoza angrily denied Badenhausen's account.

The Guerrero fight was a disappointment at the box office after a heavily hyped month on Showtime and its parent CBS, including two Mayweather documentaries, an appearance at the Final Four by Mayweather, a reality series and heavy promotion on the CBS Sports Radio network. Five of Mayweather’s previous six fights on HBO had topped one million PPV buys.

Showtime and others outside the network insist the Guerrero fight will narrowly beat the one million mark once everything is counted, while other boxing insiders told Forbes that the fight is likely to top out at 875,000 buys. Either figure has to be a disappointment. Showtime boss Stephen Espinoza told Forbes before the Guerrero fight that it was trending better than Mayweather’s Victor Ortiz fight in 2011 (1.25 million buys) and had an outside shot at the Miguel Cotto bout in 2012 (1.5 million).

Pay-per-view is a very difficult sell and it's easy to lose sight of the fact that these are extraordinary figures that fighters like Mayweather and Manny Pacquiao are selling. There have been less than 30 fights in the more than 20-year history of pay-per-view which sold 1 million or more.

And even if the reports are correct, it's not that big of a deal, because 875,000 is a spectacularly strong number and nothing to be disappointed about. That would have generated in excess of $50 million in sales.

It will be interesting to see what CBS reports in its 3Q results, given that the Mayweather-Canelo Alvarez fight will come right before the end of the quarter. That is expected to be, by far, the best performing boxing pay-per-view show since Mayweather-De La Hoya in 2007.

Yahoo! Sports predicts that show will do 1.8 million sales, though it would not be a shock to see it do better.

CBS Second Quarter 2013 Earnings Release

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